Guest editorial

Citation

Currie, W. and Weerakkody, V. (2003), "Guest editorial", Business Process Management Journal, Vol. 9 No. 6. https://doi.org/10.1108/bpmj.2003.15709faa.001

Guest editorial

Wendy Currie is a Professor of Strategic Information Systems and Director of the Centre for Strategic Information Systems (CSIS), Department of Information Systems and Computing, Brunel University, UK. She currently holds three research grants from the EPSRC and ESRC for the study on application service provisioning (ASP) and Web services. Professor Currie has published several books and journal articles on Management and Strategy. She holds a PhD from Henley Management College and is an associate editor for the MISQ Journal.

Vishanth Weerakkody is a Lecturer in the Department of Information Systems and Computing at Brunel University, UK. He holds an MSc in Business Systems Analysis and Design from City University in London and a PhD in Process Management and Information Systems from the University of Hertfordshire. Dr Weerakkody has published several journals and conference articles and held various IT positions in multinational organisations.

In the current age of globalisation, overall business integration and rapidly evolving trading environments; new technologies are constantly being introduced, as old ones become obsolete. While businesses are prone to continuous changes and rapid evolution (Clark et al., 1995), technology today has become a strategic enabler and is no longer relegated to the task of automating processes and functions.

The increasing importance of IT to organizations over the years has led in many instances to seek viable IT solutions through in-house operations or from access to third party services. The latter emerged in the 1960s as a form known as “bureau service” where organizations sought third party services to rent processor time (Michell and Fitzgerald, 1997). This era was characterized by expensive and physically large computers. In order to avoid this capital investment, many organizations contracted with a data processing service bureau to operate the data processing function. This became known as facilities management (Owen and Aitchison, 1988).

The 1970s witnessed the beginning of the standard application package concept to the market and more standardization to wider levels of systems software. However, the increasing demand for IS applications and inadequate supply of IS personnel during the 1980s, encouraged managers to seek solutions through contract programming which was a form of outsourcing. While there was much support for vertical integration during this period (Porter, 1985), on site facilities management and complete outsourcing of IT systems was common. In simple terms, IT outsourcing involves the significant contribution of external vendors in the physical and/or human resources associated with the entire or specific component of the IT infrastructure in an organisation (Loh and Venkatraman, 1992).

The 1990s saw a productivity-paradox emerging with many firms facing ever-increasing costs associated, in particular, with client/server computing. During this period, outsourcing was seen as a mode for transferring the cost of IT investments to an external source (Hirschheim et al., 2002).

At the same time (early 1990s), business process reengineering (BPR) emerged as the foremost technique for managing a cost-effective, efficient and competitive firm (Davenport, 1998; Hammer and Champy, 1993; Harrington, 1991). However, BPR introduced with it practical difficulties in reengineering legacy information systems in firms (Child et al., 1994; Stickland, 1996; Weerakkody and Hinton, 1999). Further, many firms found that the success of IT outsourcing often depended on effective management of business processes. Companies which were able to manage and transform their business processes whilst outsourcing “non-core” processes were able to make significant efficiency gains. In recent years though, the issue of business processes management (BPM) has returned to center stage, most notably with new process management challenges arising from the boundary-less “e-economy”.

During the mid 1990s, technical developments in the form of the Internet were emerging with vendor promises of reducing the price of business computing (Currie et al., 2003). The growth of the Internet formed the foundation for a new network-centric computing paradigm where firms could shift software applications from the desktop to the network and servers. As the 1990s came to a close, the convergence between telecommunications and computing was seen as a panacea to reduce the total cost of ownership (TCO) of business computing. In addition, the evolution of the Internet as a means of publishing to a dynamic, secure medium for sharing information and software applications would provide an efficient, cost-effective way previously not possible under traditional outsourcing models.

The application service provision (ASP) model emerged as part of a new paradigm for business computing during the late 1990s. By 2000, the acronym ASP was one of the most widely used in the business community. In short, the term ASP was used to denote the delivery of software-as-a-service, priced on a per-seat (user), per-month basis. Global interest in the Internet and network computing was leading to a rebirth of subscription-based software applications outsourcing. Since the deployment of Internet-based applications was seen as more cost-effective than client/server computing, interest in applications outsourcing gained momentum, particularly for those seeking new business development opportunities. Under the applications outsourcing model, customers enter a contract with an ASP to rent business-focused or vertical (industry-specific) applications, accessed via a Web browser; either over the Internet, virtual private network (VPN), or dedicated network.

Although in the past outsourcing was often seen as a practice used to offload the routine day-to-day operations of a firm to a third party to manage, the emergence of the ASP model added a new dimension to outsourcing. One of the attractive features of the ASP model is that it offers the chance for smaller firms that were hitherto unable to afford best of breed enterprise applications to benefit from the economies of scale characterising the ASP model (such as the availability of applications on a pay-per-use basis) (Miley, 2000).

While the ASP model focused on selling access to managed applications initially (1999-2001), it is currently moving to provide business services (Computer Business Review, 2001; IDC, 2002). This has encouraged some firms not only to outsource their application software to a remote vendor, but also to hand over the running of some of their routine-non-core business processes to service providers. This evolution is referred to as “business process outsourcing” (BPO), where entire business processes that are deemed to be “non-value-add functions” are outsourced and handled by a separate firm. BPO involves the assumption of responsibility by a service provider for a series of tasks that, performed together, achieve a specific business outcome (Cherry Tree and Co., 2001).

While the ASP business model promises firms remote-access to “best of breed” enterprise applications on a rental basis, BPO allows firms to benefit from industry robust, efficient and cost-effective business processes of leading service providers. Such a model will enable ASPs to offer a clearer return on investment, making them a more alluring prospect for potential customers. As a result, the service provision industry has seen an increase in demand for suppliers who are both ASP and BPO providers (Brown, 2001).

Over the last decade, with the emergence of BPR in the early 1990s and the ASP model in the late 1990s, BPO has grown in popularity and has been revitalised. In addition, advancements in information and communications technologies (ICTs), particularly those relating to the growth of the Internet, corporate extranets and intranets, have enabled business-to-business commerce. As such, the realisation of BPO has become a distinct possibility as the technical and communications infrastructure enables firms to outsource selected business processes to third parties. Further, enterprise systems in many firms are increasingly modular and able to interact with other internal and external applications, which have made the outsourcing of business processes such as human resources, financial accounting, and procurement a less complicated task. This is further facilitated by the emergence of the Web-services concept and Microsoft’s.NET and Sun Microsystems J2EE platforms (Currie et al., 2003).

In this special issue on BPO and ASP for the Business Process Management Journal, six research and practitioner papers are presented on a range of topics from ERP outsourcing to global outsourcing through ASP, and the impact of ASP and BPO on effective process management in firms. The paper by Bryson and Sullivan on “Designing effective incentive-oriented contracts for application service provider hosting of ERP systems” explores ERP outsourcing in terms of the ASP approach. They highlight the significance of contracts when outsourcing ERP systems using an ASP and present an approach to analyse incentive schemes and structure ERP outsourcing contracts. This is pursued through a transaction cost perspective for the analysis of ERP systems outsourcing decisions. The authors attempt to identify all significant risks associated with outsourcing core information processing functions and assign probabilities and dollar values for each risk.

The paper by Tebboune, “Application service provision: origins and development” aims to establish a discussion about linking two phases in the development of information systems and technology (IS/IT) outsourcing: traditional IS outsourcing and ASP. They argue that the emergence of ASP is both evolutionary and revolutionary. The paper investigates different aspects of each strategy (IS/IT outsourcing and ASP), and draws a discussion on linking them. The authors argue that traditional IS/IT outsourcing assumptions could be used as a basis for studying the ASP environment, but concede the need for further research to formulate new rules for the ASP model.

In his paper, “A framework for global IS outsourcing by application service providers”, Soliman identifies the critical factors that influence ASPs to outsource globally. The author identifies factors such as product development costs, IT talent, product quality, communication technology, tax incentives, and cultural differences as influencing ASPs strategy to outsource globally. The paper discusses the differences among different types of global outsourcing, explores the emerging trend and advantages of utilizing ASP, and recommends measures to ensure the success of projects to be developed globally.

Khalfan continues in the theme of global outsourcing in his paper “A case analysis of business process outsourcing project failure profile and implementation problems in a large organisation of a developing nation”. The author highlights the significance of needing to understand the complex cultural and political implications of outsourcing within a global context. He uses a case study to gather data on IS/IT outsourcing practices in a large firm, obtaining such information for the first time in Kuwait. Through this approach, the author identifies critical elements missing in the outsourcing contract that lead to the demise of a BPO project in the firm.

The paper by Lemahieu et al., “An enterprise layer based approach to application service integration”, examines the integration problem arising from the use of different applications from different vendors. In their paper, the authors describe an integration approach to managing applications based on the construction of an enterprise layer. They argue that this approach allows staying away from a document-based, flow-oriented “stove-pipe”-like system where information is vehicled from one application to another. The authors suggest that common information be stored into a shared object database that can be accessed through an event-handling layer. This approach, according to the authors, is then used to synchronise all information in third-party applications by means of co-ordination agents, allowing companies to remain more independent from their ASPs as they remain the owners of core company data.

The final paper, by Weerakkody and Currie, “Can ASPs improve the process management capabilities of firms?” examines how the ASP business model facilitates business process and information technology improvements in firms through effective process management. This is pursued through a review of relevant literature and empirical evidence gathered from a case study based investigation in six small to medium sized firms in the UK. By examining the features of remote application and BPO in the context of business process management, the paper outlines how firms can improve their business and IT performance. The authors use empirical evidence to substantiate their arguments and suggest areas for future research.

Wendy Currie and Vishanth WeerakkodyGuest Editors